Confidence is tumbling among Britain’s food and drink manufacturers, as inflationary pressures including energy, labour and raw material costs gain pace, according to a survey by the industry body.

Business confidence plummeted to -47% in the final three months of last year, according to the Food and Drink Federation (FDF), down from -6% in the previous quarter, as companies in the sector were hit by measures announced in the October budget.

The confidence score among the country’s 12,500 food and drink businesses has slid to its lowest level since the final quarter of 2022, a time when inflation was surging after Russia’s invasion of Ukraine earlier in that year.

Rising energy and commodity costs are among the pressures facing food and drink manufacturers in the coming year, according to the FDF’s state of industry report, as well the costs associated with government policies, such as changes to employers’ national insurance contributions (NICs).

Food and drink businesses are also due to carry the lion’s share of new packaging rules known as the extended producer responsibility (EPR) scheme – designed to improve recycling rates and tackle plastic pollution – estimated to cost at least £1.4bn a year from October.

The FDF said the financial pressures weighing on confidence were causing businesses to reconsider investment, which could affect growth in the industry.

More than half (54%) of the businesses that responded to the FDF’s survey said taxation was the leading factor that would constrain investment over the coming year, while 52% said forthcoming regulation would act as a barrier to investment.

As higher labour costs bite, almost two-thirds (64%) of manufacturers said their main motivation for investment was workforce efficiency, as they aimed to increase productivity from their current employees rather than hiring more staff.

“This marked decline in business confidence shows that government and industry needs to take action now to ensure we have a thriving, productive food and drink industry into the future,” said Karen Betts, the FDF’s chief executive. “With pressures on industry mounting, government must act to remove the roadblocks and accelerate growth.”

The FDF is calling on the government to work with industry on regulation to boost growth and the competitiveness of the UK’s food and drink sector.

It is recommending a range of measures, including securing a share of the UK’s research and development spend for food and drink manufacturing to encourage businesses to invest in developing new products and healthier choices for consumers.

It is also calling for government and industry to work together on a workforce and skills plan and for ministers to prioritise a more strategic approach to trade relations with the EU, which despite Brexit remains the sector’s most important trading partner.